IG: IRS credit cards used for wine, pornography

STEPHEN OHLEMACHER,Associated Press

Published: Wednesday, June 26, 2013 at 4:30 a.m.

Last Modified: Tuesday, June 25, 2013 at 9:42 p.m.

WASHINGTON (AP) — Poor oversight by the Internal Revenue Service allowed workers to use agency credit cards to buy wine for an expensive luncheon, dorky swag for managers' meetings and, for one employee, romance novels and diet pills, an agency watchdog said Tuesday.

Two IRS credit cards were used to buy online pornography, though the employees said the cards were stolen. One of the workers reported five agency credit cards lost or stolen.

IRS employees used agency credit cards to make more than 273,000 purchases totaling nearly $108 million in 2010 and 2011, according to the report by the Treasury inspector general for tax administration.

The vast majority of those purchases were legitimate, the report said. However, the report said the IRS has inadequate controls to prevent inappropriate purchases.

For example, investigators found that one IRS employee spent $2,655 on diet pills, romance novels, steaks, a smartphone and baby-related items, including bottles, games and clothes. The case was referred to the IG's office that investigates employee misconduct, the report said.

Among other "improper" purchases identified by the inspector general:

— $3,152 to rent a popcorn machine and to buy prizes for an employee event, including bandanas, stuffed animals, sunglasses and stovepipe hats.

— $418 for novelty decorations and swag at managers' meetings, including kazoos, bathtub toys and "Thomas the Tank Engine" wristbands.

— $119 for Nerf footballs that were never used and were found stored in a filing cabinet.

"Inadequate procedures to identify, report and address inappropriate use leaves the IRS purchase card program vulnerable to repeated violations of applicable laws and regulations," said J. Russell George, the Treasury inspector general for tax administration.

The report comes as the IRS faces intense scrutiny over agents targeting conservative groups for additional scrutiny when they applied for tax-exempt status. Documents released Monday show that liberal and progressive groups were singled out, too.

Also, the inspector general released a report earlier this month that detailed lavish spending at employee conferences. In all, the agency spent nearly $50 million on employee conferences from 2010 through 2012.

"Clearly, any inappropriate card use impacts our bottom line and is cause for concern," said acting IRS Commissioner Danny Werfel, who took over the agency last month. "Wasteful spending cannot be tolerated, and any employees found to be abusing the system will be held accountable. In fact, we are following up on several inappropriate incidents mentioned in the report, ranging from internal actions to criminal charges."

"That said, more than 99.75 percent of IRS purchases adhered to the rules," Werfel added. "The IRS has made important progress over the past two years in strengthening the controls in our purchase card program. We are committed to protecting taxpayer resources, and we will take quick action to implement all of TIGTA's recommendations."

The new report highlighted a 2010 conference in Washington for tax officials from other countries. At a luncheon, the IRS bought 28 bottles of wine — for 41 guests, the report said. A dinner at the conference cost the agency $140 a person, four times the allowable government rate at the time.

In all, the agency spent more than $50,000 on meals, receptions and meetings at the five-day conference, the report said. Agency credit cards were used for about $12,500 of the purchases.

"It is important to note that the luncheon described in the report took place in 2010 for an international business meeting of tax officials from several of the world's largest countries. This meeting is an important forum for international leaders on major tax issues," Werfel said. "However, given the excessive purchases for the luncheon, I am directing the IRS business units to more closely review spending in advance for any similar events to ensure all spending is appropriate."

The IRS participates in the General Services Administration's SmartPay purchase card program. Under the program, agency employees can use purchase cards, which act like credit cards, to buy work-related items. The maximum amount for an individual purchase is $3,000.

More expensive items are subject to competitive pricing policies.

In 2010 and 2011, internal controls at the IRS found 327 cases in which employees divided their purchases to skirt the $3,000 limit. The inspector general's office found an additional 34 cases. In all, the purchases totaled $493,000, the report said.

The report said 94 employees were responsible for the purchases, including 22 workers who had done it more than once in a six-month period. However, the report said, none of the employees were disciplined.

As for the two IRS employees whose cards were used to buy pornography, the inspector general's report didn't determine who bought the material or whether their cards were actually stolen. One of the employees is no longer at the agency. The IG is continuing to investigate the other employee, the report said.

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